Delphi Filing Lifts Risk
On Collateralized Debt

LONDON -- European banks and hedge funds have shown a voracious appetite for derivatives based on bonds issued by companies here and in the U.S. Many of those investments looked a lot riskier yesterday after U.S. auto-parts maker Delphi Corp. filed for bankruptcy protection in New York.

Although the announcement came as no surprise to many, Delphi's filing Saturday caused big ripples in the fast-growing market for securities tied to the performance of pools of corporate bonds, commonly known as collateralized debt...